Intervention policy of the BoJ: A unified approach

Résultats de recherche: Contribution à un journal/une revueArticle

Résumé

Intervening in the FX market implies a complex decision process for central banks. Monetary authorities have to decide whether to intervene or not, and if so, when and how. Since the successive steps of this procedure are likely to be highly interdependent, we adopt a nested logit approach to capture their relationships and to characterize the prominent features of the various steps of the intervention decision process. Our estimations based on Japanese data from 1991 to 2004 indicate that the Bank of Japan: (i) mainly reacted to deviations of the exchange rate with respect to fundamentals and (ii) tended to favour secrecy when its credibility was low. We also provide new insights on the so-called secrecy puzzle by modeling explicitly the risk for a secret intervention to be detected. Our results have important implications in terms of exchange rate policy, such as the emergence of a trade-off between intervention size, communication policy and secrecy. Our results tend to provide some explanation for the observed persistence of ineffective intervention policy during some sub-periods.

langue originaleAnglais
Pages (de - à)904-913
Nombre de pages10
journalJournal of Banking and Finance
Volume33
Numéro de publication5
Les DOIs
étatPublié - 1 mai 2009

Empreinte digitale

Policy intervention
Secrecy
Decision process
Communication policy
Trade-offs
Bank of Japan
Credibility
Nested logit
Modeling
Persistence
Exchange rates
Deviation
Central bank
Exchange rate policy
Authority

Citer ceci

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abstract = "Intervening in the FX market implies a complex decision process for central banks. Monetary authorities have to decide whether to intervene or not, and if so, when and how. Since the successive steps of this procedure are likely to be highly interdependent, we adopt a nested logit approach to capture their relationships and to characterize the prominent features of the various steps of the intervention decision process. Our estimations based on Japanese data from 1991 to 2004 indicate that the Bank of Japan: (i) mainly reacted to deviations of the exchange rate with respect to fundamentals and (ii) tended to favour secrecy when its credibility was low. We also provide new insights on the so-called secrecy puzzle by modeling explicitly the risk for a secret intervention to be detected. Our results have important implications in terms of exchange rate policy, such as the emergence of a trade-off between intervention size, communication policy and secrecy. Our results tend to provide some explanation for the observed persistence of ineffective intervention policy during some sub-periods.",
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Intervention policy of the BoJ : A unified approach. / Beine, Michel; Bernal, Oscar; Gnabo, Jean Yves; Lecourt, Christelle.

Dans: Journal of Banking and Finance, Vol 33, Numéro 5, 01.05.2009, p. 904-913.

Résultats de recherche: Contribution à un journal/une revueArticle

TY - JOUR

T1 - Intervention policy of the BoJ

T2 - A unified approach

AU - Beine, Michel

AU - Bernal, Oscar

AU - Gnabo, Jean Yves

AU - Lecourt, Christelle

PY - 2009/5/1

Y1 - 2009/5/1

N2 - Intervening in the FX market implies a complex decision process for central banks. Monetary authorities have to decide whether to intervene or not, and if so, when and how. Since the successive steps of this procedure are likely to be highly interdependent, we adopt a nested logit approach to capture their relationships and to characterize the prominent features of the various steps of the intervention decision process. Our estimations based on Japanese data from 1991 to 2004 indicate that the Bank of Japan: (i) mainly reacted to deviations of the exchange rate with respect to fundamentals and (ii) tended to favour secrecy when its credibility was low. We also provide new insights on the so-called secrecy puzzle by modeling explicitly the risk for a secret intervention to be detected. Our results have important implications in terms of exchange rate policy, such as the emergence of a trade-off between intervention size, communication policy and secrecy. Our results tend to provide some explanation for the observed persistence of ineffective intervention policy during some sub-periods.

AB - Intervening in the FX market implies a complex decision process for central banks. Monetary authorities have to decide whether to intervene or not, and if so, when and how. Since the successive steps of this procedure are likely to be highly interdependent, we adopt a nested logit approach to capture their relationships and to characterize the prominent features of the various steps of the intervention decision process. Our estimations based on Japanese data from 1991 to 2004 indicate that the Bank of Japan: (i) mainly reacted to deviations of the exchange rate with respect to fundamentals and (ii) tended to favour secrecy when its credibility was low. We also provide new insights on the so-called secrecy puzzle by modeling explicitly the risk for a secret intervention to be detected. Our results have important implications in terms of exchange rate policy, such as the emergence of a trade-off between intervention size, communication policy and secrecy. Our results tend to provide some explanation for the observed persistence of ineffective intervention policy during some sub-periods.

KW - FX intervention

KW - Market detection

KW - Nested Logit

KW - Secrecy puzzle

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